Saturday, February 26, 2011

In Washington's current state of dysfunction, everyone has a favorite hyper-partisan moment. House Republican Whip Eric Cantor's moment came at a White House meeting with congressional leaders on day three of the new Administration. He handed President Barack Obama a list of ideas to fix the economy. Pointing to a small business tax-cut item, Obama said: "We disagree on tax policy." When Cantor tried to justify his own position, Obama responded: "Elections have consequences, and at the end of the day, I won."

"I’m very proud of what they are doing,” she said. “They’re standing up for the rights of America's workingmen and -women to have a voice at the table about their jobs and their futures, so yes, I support them.”

Working people have a voice at the table because their representatives wet themselves and run away and hide like scared punks? Here I thought elections had consequences, ma'am. In fact, I think you told us we had to pass legislation so that we could find out what was in it, right?

The fact is that Wisconsin is broke, and their government is broken. Nice piece in Reason on this. The business of the Democratic party is taking money at gunpoint and using it to overpay people for public jobs...so those people are forced by self-interest to vote Dem.

This means of buying support has long been the tactic of every dictatorship, of course. But WI, and CA, and OH, are NOT dictatorships. They are republics, and the voters are trying to fix things while there is still time.

Now, I agree that the Repubs in WI are grossly overplaying their hand. Attacking unions this way is way out of line, and they are going to pay for it.

Just. Like. The. Dems. Did. on health care. So spare the indignation, Dems. You taught 'em how to do this. For they have sown the wind, and they shall reap the whirlwind: it hath no stalk: the bud shall yield no meal: if so be it yield, the strangers shall swallow it up. Hosea 8:7

We know that unemployment is still very high, around 9% of the labor force. Initial jobless claims fell last week to below 400,000, but the 4 week moving average is still right at 400,000. Historically, in a healthy economy this number should be somewhere between 300,000 and 350,000. But we are slowly moving in the right direction and the overall unemployment rate should start to fall (que dios me escuche!)

However, the way unemployment is currently distributed across the population makes me fear that, without some type of effective intervention, the new equilibrium unemployment rate will be higher than what we've seen in the past.

The share of unemployment that is long term (more than 27 weeks) is very high (almost half of the currently unemployed have been so for more than 27 weeks!), and the unemployment rate for uneducated workers aged 25 or greater is also very high (around 14% compared to around 5% for workers with at least a BA).

Long term unemployment always rises in recessions, but this case is exceptional as can be seen in the following graph (clik the pic for a more depressing image):

Today, Tyler links to an article where employers at a job fair are discouraging currently unemployed workers from filling out applications!

Here's a graph of unemployment broken out by education level (clik the pic for a more depressing image):

I know that I haven't shown that the long term unemployed and the low education unemployed are the same people, but I am pretty sure that at least a big chunk of them are, and it's a real problem because the obvious policy response would be to educate them and that is neither quick, easy, or cheap.

But the likely combination of persistent high unemployment and low earnings for folks with low education and America's increasingly dismal record of turning out quality high school graduates is truly distressing.

Thursday, February 24, 2011

Presti said he did not enter the trade deadline looking to deal the 6-foot-9, 235-pound Green, a fourth-year player out of Georgetown.

"That was not an objective," Presti explained. "There were only a couple of players I would consider, and Perkins happened to be one of them.

"If we could not have gotten Perkins, we would have been happy standing pat (with Green on the roster), but you can't just get a guy like Kendrick Perkins. You can't just get guys like that. It will cost you something. He's a 26-year-old beast. He's a championship-level, experienced guy, but he's young. He fits our timeline tremendously."

Jeff Green just was not a realistic power forward; he's much better suited for small forward but Kevin Durant is doing ok at that spot.

Now the Thunder have a defensive minded center and a back up center. I guess Ibaka and Collison will play the 4.

It's a little bit weird to get two centers an no power forward, but this is a great move I think. I'd like to know a bit more about Kendrick's contract situation and where the Thunder are going to move Nate Robinson, but I am happy given what we know as of now.

*******UPDATE***** Kendrick's contract expires this summer and apparently he's still not ready to play. So Nazr will be starting at center then? Green had to go, and I guess he didn't have too much value. I am still good with the deal. Thunder haven't committed money long term to any of these new guys.

The line: Iran was first to overthrow American puppet government, in 1979. Rest of Arab world finally catching up, should acknowledge Persian/Shi'a leadership. In other words, Shah=Mubarak=etc.

Wow. Balls, that does take. Impressive. I can imagine some guys sitting around arguing about how to pitch this. Somebody comes up with the "Iran leads toward democracy and overthrow of Great Satan" bit. They all laugh, "No, that's too stupid. We oppress our own people." Then they look at each other..."Ya know, it could work! And it will be hilarious to hear the Americans sputter."

My boy, Dan Lee, has a nice paper coming out in PRQ."Anticipating Entry: Major Party Positioning and Third Party Threat"

Daniel LeePolitical Research Quarterly, forthcoming

Abstract: Observers of U.S. elections have reason to believe that third parties arenot relevant political actors since they rarely win many votes or influence which major party wins an election. Researchers should use dependent variables besides vote choice and vote share to find third party effects that are a normal aspect of the American two-party system. A spatial model of elections motivates the hypothesis that a higher likelihood of third party entry induces greater major party candidate divergence. An empirical test that uses candidate positioning data in the 1996 U.S. House elections provides evidence of this third party effect.

So, here is the answer to the question, "Why run as a third party candidate?" We don't have to WIN to make a difference. And just the fact that a third party COULD enter conditions competition between the two state-sponsored parties.

The point is that when a reporter says, "But you can't win!", here's your answer. Opening the system to competition helps CITIZENS by making the big parties more responsive. And the article is fully peer-reviewed.

-- U.S. sending officials to Europe to coordinate effort to stop "outrageous" violence in Libya, President Obama says. (CNN)(Slate update)

Really? President Obama's first instinct when there is violence always seems to be to call up some.... lawyers. Damn.

Reminds of a great old William Hamilton cartoon (can't find it online). One guy talking to another, in front of some U.S. flags, obviously a government office. Upset guy says, ”I think it’s high time we quit shilly-shallying and put a couple of committees together to take a look at some of the contingencies of toughening our rhetoric!”

Abstract: Age is often found to be associated with a plenitude of socioeconomic, politico-administrative, biological and thanatological variables. Much less attention has been paid by scholars, however, to explaining ‘age’. In this paper we address this unfortunate scientific lacuna by developing a model of ‘age’ as a function of several factors suggested by (post)rational choice and social constructionist theories. Using state-of-the-art multilevel statistical techniques, our analysis allows the determinants of age to vary with the institutional characteristics of European countries. Our findings convincingly show that generalized trust in strangers, support for incumbent extremist political parties in provincial elections held in the month of January, and the percentage of overqualified women in the cafeterias of national parliaments are all statistically significant explanations of ‘age’. Our findings have obvious implications for conspiracy theorists, organizational advisors, spin doctors and ordinary charlatans.

Alternate titles: "The devil came down to Norman", "We came not to praise Caesar, but to poison him".

Regarding the second alternate title, here is an un-photoshopped picture of the entree from the gala dinner (clic the pic for a more un-appetizing image):

According to my sources, Krugman was Krugman: Insightful and analytical on international economics, predictably partisan on domestic politics.

Bad news for Tyler: PK confessed to not having read "The Great Stagnation", though he said he was a regular reader of "Marginal Revolution".

Good news for rich people: PK said that had he been president, he would have let all the "Bush tax cuts" expire, even though it would harm the economy, because he feels that it was the last chance to ever get rid of the cuts for the rich. He fears they will now be permanent.

While endorsing more stimulus and more infrastructure spending, he dissed high speed rail, saying it should be a very low priority at best.

All in all, he did an hourlong Q&A with students and some Econ faculty, then the "dinner" and a speech. Here is a write-up of the Q&A from the student paper.

The LMM is a BIG JBJ fan. He makes her happy. And if sometimes she calls me "Jon" when we go upstairs, it's a small price to pay.

Here is a representative sample of the entire arena. (N&O: http://www.newsobserver.com/2011/02/21/1005895/bon-jovi-in-concert-022111.html)With all that bouncing, there was a lot of Victoria's Secret product being asked to bear load factors, fore and aft, that had to be well beyond design tolerances. But I don't think there were any injuries. Hooray for American engineering!

And it was fun. (N&O: http://www.newsobserver.com/2011/02/21/1005895/bon-jovi-in-concert-022111.html)

Abstract:The present research tested the hypothesis that perception of others' self-control is an indicator of their trustworthiness. The authors investigated whether, in interactions between strangers as well as in established relationships, people detect another person's self-control, and whether this perception of self-control, in turn, affects trust. Results of 4 experiments supported these hypotheses. The first 2 experiments revealed that participants detected another person's trait of self-control. Experiments 3 and 4 revealed that participants also detected the temporary depletion of another person's self-control. Confirming the authors' predictions, perceived trait and state self-control, in turn, influenced people's judgment of the other person's trustworthiness. In line with previous research, these findings support the positive value of self-control for relationships and highlight the role of perceived self-control for the development of a fundamental relationship factor: trust.

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Self-Regulatory Strength and Consumers’ Relinquishment of Decision Control: When Less Effortful Decisions are More Resource Depleting

Murat Usta & Gerald HäublJournal of Marketing Research, forthcoming

Abstract:Based on the self-regulatory strength model and prior research on self-esteem threats, the authors predict and show that delegating decisions to surrogates – such as financial advisors or physicians – depletes consumers’ limited self-regulatory resources more than making the same decisions independently, thus impairing their subsequent ability to exercise self-control. This is the case even though decision delegation actually requires less decision making effort than independent decision making (Study 1). However, the resource depleting effect of decision delegation vanishes when consumers have an opportunity to affirm their belief in free will (Study 2). Moreover, remembering a past decision that one delegated impairs self-control more than remembering a decision that one made independently (Studies 3 and 4). The theoretical and practical implications of these findings are discussed.

Sunday, February 20, 2011

Look, the welfare economics case for free trade could be built on (a) the Pareto criterion, or (b) the Kaldor-Hicks Compensation Principle.

As Angus notes, no way you can say moving from protection to free trade is a Pareto improvement. There are winners and losers.

And no Libertarian can invoke the KHCP, because it's collectivist and utilitarian. KHCP does not require compensation be made, and doesn't even require individual consent, and so it is inherently coercive. A majority decides on a policy, and the minority is harmed without its consent. Yes, perhaps the harm was caused by eliminating a policy (protection) that was itself coercive (consumers were harmed without THEIR consent), but you can't get to free trade unless you go the collective-coercion route. Angus is obviously right about that.

Second, I have a paper coming out in an edited volume that points out the equivalence of KHCP and Coase, in terms of costs (in both cases, you are adding up costs and benefits). Differences are (a) KHCP doesn't require consent or compensation, while Coase requires both, and (b) KHCP faces the Hayek problem, because there are no prices to measure welfare costs. Coase forces bargaining and honest preference revelation, EXCEPT when transactions costs of collective action and preference revelation are too high.

In last Sunday's NY Times economics column, NGM quite reasonably points out that voluntary exchanges benefit both parties in the exchange.

However, he then makes an unsupportable leap to the following:

Listening to the president, you might think that competition from China and other rapidly growing nations was one of the larger threats facing the United States. But the essence of economic exchange belies that description. Other nations are best viewed not as our competitors but as our trading partners. Partners are to be welcomed, not feared. As a general matter, their prosperity does not come at our expense.

I do agree that China is not one biggest problems the US is facing, but not for the reasoning that NGM uses which is that all voluntary exchanges are mutually profitable (read the article, it's the only principle he speaks of before giving the quote i reproduce above).

People, the United States is not a person! Only in DSGE models do we assume that all individuals are identical! There is no "our" to which general statements can be attached.

Yes, going from autarky to free trade will raise the GDPs of both nations, but that is a very far cry from saying that a large number of individuals will not be made worse off in the process. I figure that NGM is familiar with the Stolper-Samuelson theorem, so I guess he is assuming the political process always provides adequate compensation for the losers??

ROFLMAO, anyone?

Here's a case for free trade:

Individuals should be allowed to contract with whoever they wish, without government interference based solely on geography.

Now, that is not much of an economic argument, but, to tell the ugly truth, THERE ISN'T MUCH OF AN ECONOMIC ARGUMENT.

Once you factor in agent heterogeneity, imperfect competition, increasing returns, and an arbitrarily large number of traded goods, the welfare economics of free trade is murky at best.

Here's a political economy case for free trade:

Yes free trade has its losers and drawbacks, but the losses and distortions from free trade are far less than the losses and distortions from politicized, "managed", trade so free trade is therefore preferable.